Tax Revenues and the Fiscal Cost of Trade Liberalization, 1792-2006

Julia Cagé and Lucie Gadenne

SciencePo Working papers Main from HAL

Abstract: This article examines the impact of trade liberalization on government revenues. Using a new dataset on tax revenues for 130 countries between 1792 and 2006, we identify ninety-nine episodes of trade liberalization defined as a large fall in trade tax revenues not accompanied by a decrease in trade. Seven took place before World War One, seven in the interwar period, eighteen in the Bretton Woods period and the remainder after 1970. We examine the extent to which countries were able to recover the tax revenues lost by liberalizing trade by using other sources of revenue. We find that historical (pre-1970) trade liberalization episodes were unlikely to be accompanied by decreases in tax revenues, especially during the Bretton Woods era. In the recent period however, over 40% of the developing countries in our sample experience a fall in total tax revenues that lasts more than ten years after an episode of trade liberalization. Overall, trade liberalization led to larger and longer-lived declines in tax revenues in developing countries since 1970 than in today's rich countries in the 19th and 20th centuries. Results are similar when we consider government expenditures, suggesting decreases in trade tax revenues negatively affect governments' capacity to provide public services in many developing countries.

Keywords: Tax revenues; Fiscal cost; Trade liberalization (search for similar items in EconPapers)
Date: 2018-10
Note: View the original document on HAL open archive server: https://sciencespo.hal.science/hal-03391923v1
References: View references in EconPapers View complete reference list from CitEc
Citations:

Published in Explorations in Economic History, 2018, 70, pp.1 - 24. ⟨10.1016/j.eeh.2018.07.004⟩

Downloads: (external link)
https://sciencespo.hal.science/hal-03391923v1/document (application/pdf)

Related works:
Journal Article: Tax revenues and the fiscal cost of trade liberalization, 1792–2006 (2018)
Working Paper: Tax Revenues and the Fiscal Cost of Trade Liberalization, 1792-2006 (2018)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:hal:spmain:hal-03391923

DOI: 10.1016/j.eeh.2018.07.004

Access Statistics for this paper

More papers in SciencePo Working papers Main from HAL
Bibliographic data for series maintained by Contact - Sciences Po Departement of Economics ().